Question

Required information [The following information applies to the questions displayed below.] Sierra Company manufactures soccer balls in two sequential processes: Cutting and Stitching. All direct materials enter production at the beginning of the Cutting process. The following information is available regarding its May inventories: Work in process inventory-Cutting Work in process inventory-stitching Finished goods inventory Beginning Inventory 43,500 63,300 20,100 Ending Inventory 51,500 60,500 8,250 The following additional information describes the company's production activities for May. Direct materials Raw materials purchased on credit Direct materials used-Cutting Direct materials used-Stitching $ 25,000 21,750 Direct labor Direct labor-Cutting Direct labor-Stitching Total factory payroll paid (in cash) $ 15,600 62,400 133,000 Factory Overhead (Actual costs) Indirect materials used Indirect labor used Other overhead costs $ 6,000 55,000 47,000 Factory Overhead Rates Cutting (150% of direct materials used) Stitching (120% of direct labor used) Sales $256,000 Required: 1. Compute the amount of (a) production costs transferred from Cutting to Stitching, (b) production costs transferred from Stitching to finished goods, and (c) cost of goods sold. Ignore any over- or under-applied overhead in the calculation of cost of goods sold.

Answer 1

a) Work in Process (WIP) - Cutting
DEBIT	AMOUNT $	CREDIT	AMOUNT $
Opening Bal.	43500	Work In Process (WIP) - Stitching	61975
DM-cutting	21750	Closing Bal.	51500
DL-cutting	15600
Factory overhead	32625			(21750*1.5)
Total	113475	Total	113475
b) Work In Process (WIP) - Stitching
DEBIT	AMOUNT $	CREDIT	AMOUNT $
Opening Bal.	63300	Finished Goods Inventory	202055
Work in Process (WIP) - Cutting	61975	Closing Bal.	60500
DL-stitching	62400
Factory overhead	74880			(62400*1.2)
Total	262555	Total	262555
c) Finished Goods Inventory
DEBIT	AMOUNT $	CREDIT	AMOUNT $
Opening Bal.	20100	Cost of Goods Sold	213905
Work in Process (WIP) - Stitching	202055	Closing Bal.	8250
Total	222155	Total	222155